Consumer Rights Bill
Debate between Lord Stevenson of Balmacara and Baroness Jolly(9 years, 5 months ago)
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Lord Stevenson of Balmacara (Lab)
My Lords, I thank all noble Lords for speaking in the debate, and give special thanks to the right reverend Prelate the Bishop of Birmingham for taking on the amendment tabled by the right reverend Prelate the Bishop of Truro. He spoke extremely well—in borrowed shoes, perhaps, but he obviously felt the same as the right reverend Prelate did in his introductory remarks earlier. I declare my interest as the retiring chair of StepChange, the debt charity, which has a lot of experience in this area.
As we found in Committee, there is clearly an all-party consensus for action. It all boils down to the question of why, if it is right to have advertising restrictions on certain items viewed as harmful or inappropriate for children such as violence, junk food, gambling and alcohol, it is not right to do the same to prevent the harm caused by payday loans. We have clear evidence that there is significant pressure from parents and many campaign groups to place payday loans in the same category as the items that are already restricted, and we need to listen to that.
It is up to the Government to defend their position and explain why on earth they feel that they can resist this amendment. When it was debated in Grand Committee the noble Baroness, Lady Jolly, said:
“The Government share the concerns of noble Lords that this market has caused serious problems for consumers, with unscrupulous lenders taking advantage of vulnerable consumers”.
I could not have put it better myself. She added that the Government were,
“committed to tackling abuse in the payday market wherever it occurs, including in the marketing of these loans. The Government strongly agree with noble Lords that it is unacceptable for payday lenders deliberately to target vulnerable consumers with their advertising material”.
Game over, it seems to me. So far, so good—but it went downhill from there. The Minister’s argument boiled down to the tired old saw that regulation, not legislation was the right answer, and that,
“a robust set of measures are now in place to protect the vulnerable from such practices”.—[Official Report, 3/11/14, col. GC 618.]
But they do not.
What do we want? We want legislation now. What are we being offered? Wishy-washy regulations that do not stop children seeing payday lenders’ advertisements, causing irreparable harm. The Government accept that these products, like alcohol and gambling, which I have already mentioned, are unsuitable for children. They agree that advertisements for those should not be targeted at children, but they are happy to let this go forward for payday lenders. This is not good policy-making.
The Government have a chance today to give the noble Lord, Lord Mitchell, an early Christmas present and allow him to say that the job on payday lenders has been well done. This is a good thing to do. The time for reviews and evidence gathering is surely over, and I hope that the right reverend Prelate will not be dissuaded from testing the opinion of the House at the end of this debate. The noble Lord, Lord Higgins, may be right that that wording of the amendment is not exact enough, but that, of course, can be tidied up at Third Reading. We should not desist from testing the principle here simply because of difficulties with the wording. Sometimes you just have to do the right thing—and I hope we will.
Baroness Jolly (LD)
My Lords, I am grateful to noble Lords for raising the important issue of the payday lending industry again. I repeat what I said in Committee—that the strong feeling in the House on this matter is clear, and the Government share the concern that payday lenders’ advertising can encourage irresponsible borrowing and cause consumers real harm.
The Government have worked hard on this issue to listen to as many views as possible, both within this House and beyond. As was noted earlier, I have met and spoken to the right reverend Prelate the Bishop of Truro several times, and just this morning the Minister and I met the right reverend Prelate the Bishop of Birmingham—who is an excellent understudy in this matter—and other noble Lords, to discuss their concerns.
It is worth reiterating all the action the Government have taken to protect consumers in this industry, because in Committee we were a very select bunch whereas on Report there is a wider audience. First, the Government have fundamentally reformed the regulation of the payday market. The Financial Conduct Authority’s new, more robust regulatory system is already having a significant impact: the FCA has found that the volume of payday loans has fallen by 35% since it took over regulation in April; that has happened in just seven months.
The Government have also legislated to require the FCA to introduce a cap on the cost of payday loans, to protect consumers from unfair costs. This cap, which will be in place from the turn of the year, will ensure that no customer ever has to pay back more than double the amount they have borrowed. The FCA has estimated that as a result of the cap, perhaps as few as three or four firms will be able to continue in the market. The Government remain committed to tackling abuse in the payday loan market wherever it occurs, including in the marketing of these loans.
Noble Lords raised specific concerns about the potential for payday loan advertising to target children. Members of the Consumer Finance Association, the main payday loan trade body, and Wonga, which is represented separately, all have explicit policies not to advertise on children’s TV. Ofcom has found that payday loan adverts comprise a relatively small 0.6% of TV adverts seen by children aged between four and 15, which is just over one a week. This is across all channels and time slots. Ofcom has also found that over a quarter of TV watched by four to 15 year-olds is after 9 pm, after the watershed. Therefore the key to protecting children must be to ensure that all adverts seen at any time of day—and this is the point that the noble Lord was making earlier—have appropriate content and are not targeted at children in any way.
Let me be clear. There are already robust content rules in place to protect children from payday loan advertisements. The Advertising Standards Authority enforces the rules set out in the UK Code of Broadcast Advertising, or the BCAP code. The BCAP code requires that all adverts are socially responsible and ensure that young people are protected from harm.
Consumer Rights Bill
Debate between Lord Stevenson of Balmacara and Baroness Jolly(9 years, 5 months ago)
Lords ChamberRead Full debate Read Hansard Text
Lord Stevenson of Balmacara (Lab)
I am sorry that the noble Baroness, Lady Howe, has had to address these very important issues in such an empty House. Her comments deserve a better audience than they are getting at this time, although of course they will be reported in Hansard and, it is hoped, will be read.
The noble Baroness has been such a doughty campaigner on many issues of relevance and salience to various Bills over the last few years that one almost takes it for granted that she will pop up with something that we have heard before but which is none the less important. However, this time she may be beginning to sense, as I certainly do when listening to her—I hope that the Minister is also feeling this—that she is being given a bit of a run-around. This is a substantial issue dealing with real detriment in the real world, where people who have problems with gambling or who just wish to partake in it as a form of recreation previously had to deal with gambling operators located outside the UK and, hence, outside the regulatory net of the UK. Even though some of them were very close physically, there was no way in which the UK Government could operate to protect those who were in danger or provide services for vulnerable people who got involved in it.
The gambling Bill comes along and the noble Baroness puts forward a series of amendments aimed at reflecting the issues that she has just been talking about. She is told, first, the usual rubric that a voluntary arrangement would be the preferred solution and that there is not really an issue here because taking place elsewhere are conversations that will sort all this out. Of course, the pressure of time and, presumably, the pressure of the Government’s need for business mean that we do not get any further with it.
The fact is that, although the Gambling (Licensing and Advertising) Act is a major step forward, unlicensed gambling is continuing and people are still partaking in it. The latest saga—which is why I think the noble Baroness should recognise that she is being spun a line here—is that somehow the existence of a deal on a voluntary basis with four major payment processors will be sufficient to deal with the issues that she genuinely believes are of concern. I share that concern, which I feel needs to be addressed by the Government if they have a sensible interest and a public policy in this area.
Because of her assiduous research in this area, the noble Baroness has discovered that it is possible to have unlicensed gambling operators that are based offshore and over which the Government have no obvious or direct way of prevailing in terms of trying to block or stop their activities. There is now a mechanism that people can use, and would often want to use for the reasons that the noble Baroness gave, to ensure that the payments they make to these unlicensed gamblers are not caught, not visible and not made available. Therefore there is no effective blocking in place. The Government owe her a very full response on this issue—something that will lead us to better understand why they feel defensive when it is so clear that action is required. If they will not accept this amendment, which I am sure they will not, on their previous track record, they should at least give her a sense of how this matter can be taken forward. Surely, it simply is not acceptable for the Government to say that they recognise that there is an issue, to explain that they think their voluntary arrangements work when they patently do not but then to make it more and more difficult for the noble Baroness to bring forward proposals.
The noble Baroness has a very good case, and I look forward to seeing how the transactions that are currently made can be made more visible, because if they are made using an e-wallet or Ukash and are not being caught, that is obviously a problem. Why is it not possible to underpin this on a statutory basis, so that we can get at the financial transactions that are at the heart of the unlicensed operators? If they cannot get their money they will go away. What future-proofing can be brought forward, given that, as she so rightly said, this is only going to bring us up to the current state of knowledge about the technology and its use? What can be done, either now, if it is possible, or in the next piece of legislation—perhaps the Small Business, Enterprise and Employment Bill will be an opportunity—to really get to grips with this very difficult issue, which needs resolution?
Baroness Jolly (LD)
I thank the noble Baroness for her amendment, which seeks to block transactions with illegal, remote gambling operators and I applaud her tenacity. I confess that I thought we had got it sorted, so there is no intention on the Government’s behalf or indeed on my behalf to try to pull any wool over anybody’s eyes.
I wholeheartedly agree with the noble Baroness on the importance of protecting consumers. During the course of the Gambling (Licensing and Advertising) Bill 2014, I met several problem gamblers and was really very moved by their plight, as indeed were other members of the Government. As a result of the 2014 Act, all remote gambling operators selling into Britain will be required to hold a Gambling Commission licence, so they will be subject to robust and consistent regulation by the Gambling Commission, thereby increasing the protection for British consumers, supporting action against illegal activity, including on sports betting integrity, and establishing fairer competition for British-based operators.
The Government share the noble Baroness’s concern that the new remote gambling regime must be enforceable. As this House has heard before, the Government and the Gambling Commission believe that it is. In addition, the issue has been considered by the High Court. In a recent, unsuccessful, attempt to judicially review the 2014 Act, the High Court concluded that,
“there is no evidence or reason to believe that there will be a major enforcement problem”.
Therefore the Government have actually done what they thought was the right thing, and thought that they were going along the right track. As I explained during the debate in Grand Committee, the Gambling Commission has reached agreement with three payment systems organisations to work together to block financial transactions with unlicensed operators.
The Act came into force only this month and so these arrangements are in their early days. However, as I mentioned in Grand Committee, the Gambling Commission will report back to Parliament on its effectiveness in enforcing the Act. We must be guided by what the evidence tells us, and presently, up until just before the noble Baroness started speaking, the Government had found no evidence of a problem that required a legislative solution.
Consumer Rights Bill
Debate between Lord Stevenson of Balmacara and Baroness Jolly
Lord Stevenson of Balmacara (Lab)
My Lords, like the noble Lord, Lord Clement-Jones, we support an open internet, and it is in that spirit that we have signed up to the amendment. There is a case here for the Government to decide where they think the legislation currently lies, and if it is not clear that Ofcom has the powers that the noble Lord spelt out in some detail, it is important that this is resolved.
I think that it would surprise many people to learn that internet service providers have no obligation to allow their customers to access all the legal internet, despite selling “internet access” to all their customers. If DCMS believes that both existing legislation and new additions within the Bill resolve the issue of mis-selling, it is important that the Government agree with us that clarity should be made beyond peradventure. We need to know whether Ofcom is right that it does not have the powers, in which case the amendment will resolve that. If DCMS and Ofcom agree that the necessary powers do exist, DCMS should say so publicly and make it clear beyond any doubt that Ofcom has the necessary powers to act on any relevant open internet infringements. I look forward to hearing what the Minister has to say.
Baroness Jolly (LD)
My Lords, the debate on this important issue in Committee was a very good one, as my noble friend said. The discussion focused more on the protections for net neutrality than on the specifics of this amendment. I sympathised with the points made and committed to a meeting to discuss them. I thought it important that the relevant interested parties were present, especially Ed Vaizey, the Minister for Culture and the Digital Economy. His diary proved to be completely immovable. The meeting is now in the diary for this Thursday and I am looking forward to it.
It is clear from the discussions so far that this is a really complex area, and one which is causing a great deal of debate both in Europe and across the Atlantic. We believe that we are global leaders in delivering open internet services. In the UK, a competitive market, effective self-regulation and consumer expectation have delivered a much more open internet than perhaps elsewhere.
As noble Lords may be aware, industry has developed two self-regulatory codes of practice—both now with full sign-up from major ISPs, with Vodafone, EE and Virgin Media signing up to the open internet code in recent weeks. This is the code that governs their behaviour and ensures that they do not block services that compete with their own. Mobile operators that restricted some services such as Skype no longer offer new packages that do so. Ofcom, the regulator, has been in dialogue with the provider whose behaviour this clause attempts to address and there is a commitment to review the wording in its terms and conditions to ensure that these are not misinterpreted in any way.
Critics of this self-regulatory regime will say that there is no penalty for falling foul of the open internet code and that ISPs can change their mind about being signatories at any time. While this is true, it is also the case for many other areas that are self-regulated, for example in online advertising, where great strides have been made to ensure a transparent sector. However, it is also true that in the two and a half years since the open internet code was agreed, no breaches have been reported. If there is a significant change in the number of signatories or we see common breaches reported, the Government will look at this again. Consumer expectations are such that we do not envisage this happening again.
In answer to my noble friend’s comments, we have discussed these issues with Ofcom. We agree with Ofcom that there may be some room for interpretation regarding its powers in this area. However, we do not believe that the amendment would deliver the intended restrictions on internet access providers. Furthermore, Ofcom’s analysis of the market for internet access services suggests that there is not an urgent need for intervention. The market is continuing to move towards the comprehensive provision of neutral open internet access services, and there is no evidence of present consumer harm. Therefore, for the time being, and because of the recent developments in this area, we see no evidence of the need for legislation.
However, by way of reassurance, as noble Lords will know, Clause 64(2) in Part 2 of the Bill means that providers will be unable to hide definitions of the service provided—such as broadband access—in the small print, and will have to give them due prominence. The Bill also retains the protections currently in force through the Unfair Terms in Consumer Contract Regulations 1999, which give regulators the powers to tackle such abusive behaviours, if proven. We are also taking a power in the Bill to allow us, after parliamentary scrutiny, to update the grey list. This means that were consumer or trader behaviour to change, or evidence of particular consumer detriment to emerge, we could add terms to the grey list to accommodate that. That could apply in this case should changes by providers not take place or we see a shift in provider behaviour across the board that is not currently evidenced. That means that ISPs will not be able to hide any clauses and that there is a route for action for regulators, should this prove still to be an issue. I believe that that is a more appropriate way to deal with this than legislating at this point, especially given that this is being addressed by the regulator.
We should also be aware of the ongoing process in Europe regarding net neutrality as part of the telecoms single market package. The Government have always championed the self-regulatory approach, but we recognise that not all markets are the same as the UK’s and that there is growing demand for further protections for net neutrality from other member states. It is clear from the European Council that there is the will to include text on net neutrality. We will continue to engage proactively with the European Council on that, and believe that an appropriate solution can be found. The latest text from the Italian presidency shows movement towards a more principles-based and outcome-focused approach, which we believe would be more appropriate.
To conclude, while I am sympathetic to the intentions of the amendment, the Bill is not the right place to do this. Telecoms regulation needs to be handled through telecoms legislation. We do not believe that the amendment will change the regulator’s power in this area; nor do we believe it be necessary at this time, given the market developments. We will continue to engage with the EU in a constructive manner.
I commend my noble friend’s persistence on the issue. The Government are unable to accept his amendment, but I hope that I have offered sufficient assurance to persuade him to withdraw it.
Consumer Rights Bill
Debate between Lord Stevenson of Balmacara and Baroness Jolly(9 years, 5 months ago)
Lords ChamberRead Full debate Read Hansard Text
Baroness Jolly
My Lords, the Bill sets out key remedies for consumers but the Government recognise that it is also important that consumers are not discouraged from exercising them. These amendments relate to the costs of returning rejected goods to the trader. It is important that such costs do not put consumers off rejecting goods. We debated this issue at some length in Grand Committee.
We listened to the point made by the noble Baroness, Lady Hayter, and the noble Lord, Lord Stevenson, and agree that it does make sense to make it clear on the face of the Bill that the trader bears responsibility for the return costs. These two amendments provide that clarity and set a sensible balance. The trader is responsible for any reasonable costs of the consumer returning rejected goods. This would apply whether or not there is an agreed requirement for the consumer to return rejected goods. The amendments do not cover the costs of the consumer returning the goods in person to the place where the consumer took physical possession of them. We think that these are sensible amendments that meet the needs of consumers by making the law clearer without a causing significant burden to business. I beg to move.
Lord Stevenson of Balmacara
My Lords, I am extremely grateful to the Minister for accepting the words that we used when we proposed the amendment the first time around. It does not happen very often; I will relish this experience. It is a curious irony that, in Committee, in the place where I had to sit in the Moses Room—I am sorry to take up the time of the Chamber in this way—the Minister responding was framed against the television on which, as noble Lords may now remember, those little swinging bells had just been introduced. It struck me that it was Christmas: it felt like Christmas. However, her words did not say, “Christmas”; they said, “No, go away; this is silly; this is already in legislation”. Now she has changed her mind and come back. I am so pleased.
Baroness Jolly
My Lords, this amendment reflects the dynamic nature of digital content. We all recognise that digital content changes to some extent over time when we receive updates to our software and apps. I listened carefully to the concerns raised in Committee by the noble Lord, Lord Haskel, and my noble friend Lord Clement-Jones that industry viewed Clause 40 as a potential barrier to providing improvements to digital content, and I am grateful for their careful consideration.
Clause 40 provides that following an update to digital content, that digital content must still meet the quality rights: satisfactory quality, fit for a particular purpose and as described. The provision that digital content should match the description was never intended to fix the digital content to a static point in time. That would not be an option that reflected the way updates work. We made it clear in the Explanatory Notes that there was nothing to prevent updates as long as the contract stated that such updates would be supplied. Moreover, the trader has flexibility in how they describe the digital content at the outset. For example, traders can make it clear that improvements are not precluded. However, the consumer should have some protections against digital content changes which remove features that they relied on when they made a decision to buy the digital content.
There is clearly an important balance to be struck here between the ability of the digital content industry to adapt, change and innovate in a fast-paced environment and the rights of consumers to get what they have paid for. This amendment aims to address the concerns raised in debate that the provision on updates as originally drafted could prevent traders improving digital content or offering flexible products. That is not an outcome that would be good for consumers. The amendment clarifies in the Bill that Clause 40 does not prevent traders adding new features or enhancing existing features as long as the original description is still met. I beg to move.
Lord Stevenson of Balmacara
My Lords, I welcome the Minister’s comments. She is right to have responded to the discussions we had in Committee. I am sure my noble friend Lord Sugar will be looking to hire her shortly, given how much she has responded to what he said through his surrogate, my noble friend Lord Haskel.
I shall ask a couple of questions because, although I am not against this, I am reflecting on the earlier discussions in Committee and the letter received on 5 November from the Minister in relation to free digital content. I am intrigued by her remarks, which are, I think, really about a situation where there has been a consideration—I assume money has passed—so we are talking about content that has been supplied because of a contract that has been established between a consumer and a trader. I am grateful to Pauline McBride of Glasgow University, who raised this point with me, and I shall put a couple of questions to the Minister which arise from the correspondence I have been having with her.
At another point in Committee, my noble friend Lord Knight mentioned that customers frequently supply non-monetary consideration for the supply of digital content. Promises and undertakings made by a consumer under a website terms of use are a good example. There is no doubt that clicking on terms of use or some form of conditions, for example, with a well known retailer would be an example of entering into an arrangement with a supplier of digital content, but is it a contract? If it is, clearly one or two of the things that the Minister said are going to be raised. If it is not a contract, because it is not a monetary consideration, then what exactly are we talking about?
The reason for worrying about this is that research suggests that providers of websites through which access is provided to digital content are applying terms and conditions, warranty disclaimers and indemnity provisions which limit the consumer’s rights. Providers may not be able to circumvent the statutory considerations —even limited to those in the Bill, which I object to them being—but consumers will not be able to get full redress if they have self-limited themselves through clicking on to terms of use created by the website which have somehow reduced the quality of the redress they can get from the original provider. I am taking a long time to describe this, but I hope the Minister understands the point I am trying to make. I am worried about consumers who are not paying a monetary consideration but who are engaging in a contractual arrangement with a website being excluded from normal redress provisions on the grounds that there has been no monetary consideration. If the Minister could write to me on that, I would be quite happy. There is also a question about what happens if the contractual obligations being placed are such that they would not be recognised under the Bill.
Baroness Jolly
I am happy to offer a full explanation to the noble Lord by letter, but I understand that the unfair terms provision still applies when there is a contract but no money is involved.
Baroness Jolly
During the debate on digital content that we had in Committee, I noted a number of concerns raised by my noble friend Lord Clement-Jones, who is not in his place, about the complex environment in which digital content works and the difficulty for the industry in ensuring that its digital content will work seamlessly in all possible configurations on a user’s device and will not have any unintended effects elsewhere on the device.
I am grateful to my noble friend for giving such careful consideration to this matter. As I have said before, it is essential that we strike a balance between providing an appropriate and workable set of protections to consumers in this growing area and the need to enable the industry to innovate and respond flexibly to changes in a fast-paced environment. I believe that the remedies provided in the Bill for faulty digital content are proportionate and appropriate. They provide that if digital content is faulty, the consumer will be entitled to a repair, an update or a replacement, or if that is not possible, some or all of their money back.
However, there is one area in the digital content provisions where statutory liability could extend beyond the price paid for the digital content, covering where the digital content damages the consumer’s device or other digital content, and that is in Clause 46. The clause was drafted to reflect negligence principles and to clarify that consumers have a right to compensation, even for free digital content, when it causes damage and the consumer can show that the trader failed to use reasonable care and skill to prevent the damage occurring.
Clause 46 was drafted to reflect negligence principles. It is therefore appropriate that the position on limitations to liability for Clause 46 is different from that for the quality rights provided in the rest of the digital content chapter. The amendment allows traders to exclude or restrict their liability for damage to the consumer’s device or other digital content to the extent that it would be fair under Part 2 of the Bill. This seeks to maintain the approach taken to this clause of reflecting negligence principles and bring it even closer to the current position on limits to liability. The amendment also corrects an error in a cross-reference in Clause 47(2). I do not think it appropriate, however, to extend this amendment to cover the quality rights in the rest of the digital content chapter. Consumers should clearly be entitled to a remedy for faulty digital content, and the remedies provided in this chapter are appropriate. I therefore beg to move Amendment 22.
Lord Stevenson of Balmacara
My Lords, I am becoming a single-trick pony, as I think it is called. I am going to ask again about free content and I hope that the Minister can give me some solace on it. We on this side are still worried about whether free digital content, generically, can be brought within the requirements of providing quality, fitness for purpose and conformity with description. I am still unclear about how this will work in practice because of the problem in consideration. Maybe that will be covered in the letter she has promised to write to me.
I have an additional worry about this, which is that there are often contracts for delivery of services that might fall into the type caught by the amendment and which may be from a manufacturer rather than from a particular provider of software. I do not wish to accuse any particular manufacturer but will take a well known brand which has a connection with fruit. If its terms of use were such that they were going to cause significant detriment to consumers, would it be possible for the Secretary of State, in extreme circumstances, to make an order specifically addressing the terms of use that were generically produced and always clicked into by people without, I suspect, ever being read? I am a little uncertain about how this bites—sorry about the pun—when we are talking about generic material which will probably be running hidden and not even ever recognised by a consumer, and is possibly free or has at least been delivered free of any additional charge, perhaps because it is an update or a fix. Is there something that could be done on this? I quite understand that it might take time to generate a response and I would be happy with a letter.
Baroness Jolly
I, too, am the digital person for the evening, so rather than trying to put something together here at the Dispatch Box, it is probably safer for all of us if I add it to my letter.
Consumer Rights Bill
Debate between Lord Stevenson of Balmacara and Baroness Jolly(9 years, 6 months ago)
Grand CommitteeRead Full debate Read Hansard Text
Lord Stevenson of Balmacara (Lab)
My Lords, I am sure that I saw the noble Lord, Lord Clement-Jones, only a few moments ago, asking questions in the Chamber, so his conflicting engagement is extremely irritating because we were looking forward to his contribution here. Of course, we now have his parasitic packaging analogue who is gradually inhabiting all of his previous positions on matters to do with this, and we should not complain, because he once again has managed to introduce a very complicated and not very easy to grasp topic with exemplary clarity, and I thank him for that.
We on this side support the amendment in the name of the noble Lord, Lord Clement-Jones; indeed, we signed up to it for very much the same reasons as those just explained by the noble Lord. It is a huge gap in the telecoms area that there is no simple and easy switching regime: such a regime would be the foundation of ensuring a competitive market that would drive down prices, while at the same time empowering consumers. Who could be against that?
The problem we have at the moment is completely the reverse, because in the mobile industry—but also in broadband and pay TV—there are very complicated switching processes. These are huge disincentives to consumers to changing provider and this can lead to very real consumer harm in the form of either double bills—which have been well reported in recent days—or a loss of service when providers are switched, because of the difficulty of making all the ends join up.
We think that the gaining provider-led system across the communications sector will make a huge difference. It puts the customer in charge of the process; it prevents competitors in the market using different and complicated switching processes—which, as the noble Lord said, creates hassle and confusion; and it will make it much more competitive.
At the heart of the issue is an irony that does not happen in many other sectors, such as banking. If you force customers who wish to switch to contact their original supplier, you often get problems and disincentives built in, because it is not in the best interests of the supplier who is losing the customer to ensure that that egress is smooth and uncontested. That inevitably means that consumers get a raw deal, possibly do not get good price comparisons and have a lot more hassle than they otherwise would. I am happy to support the amendment.
Baroness Jolly (LD)
My Lords, a requirement for the switching of communications providers to be receiving provider-led—RPL—is part of the EU Connected Continent package. The European Parliament’s First Reading version would amend the universal services directive to require RPL switching. I assure noble Lords that the UK is engaging actively in those discussions to ensure the best outcomes for UK consumers.
The Government have considerable sympathy for RPL switching in the UK. In the Connectivity, Content and Consumers paper published last year, we emphasised that we want that across the board. I am very pleased to say that, as my noble friend said, RPL switching already operates for fixed-line voice and broadband services delivered over the BT Openreach network, although it does not yet operate for mobile services or for pay TV.
Ofcom has the power to mandate RPL switching for all communications services. In July 2014, it called for inputs from stakeholders on consumer switching. Ofcom announced that it is considering mandating RPL switching for mobile services and bundles of services, including pay TV and services over the Kcom network. The Ofcom work is essential to ensure that we get any new rules right first time, so I welcome my noble friend’s interest in consumer switching but, given the good work done so far, Ofcom’s ongoing consultation and the response to it to be published before the end of the year, I ask him to withdraw his amendment.
Lord Stevenson of Balmacara
My Lords, I declare my interest as the retiring chair of StepChange, a debt charity which is the UK’s leading independent debt advice and solutions service. StepChange offers free-to-client debt management plans, and the charity estimates that it is administering over a quarter of the total number of DMPs that are currently in place.
We know that people who face unmanageable debt often delay, sometimes for as long as a year, before seeking help. By that stage, they are often so desperate for help that they will enter into a plan with the first provider they happen upon, whether it is telephone or web-based, or whether they have just read about it in the newspapers. In a previous debate, attention was drawn to the volume of marketing calls or texts offering fee-charging debt management services. Of course, there is also the scourge of daytime advertising of such products on television and radio.
In its 2010 review of the debt management plan sector, the OFT concluded that commercial debt management companies,
“are not giving the advice or offering the solution that is in the best interests of the consumer but instead that which is most profitable to them”.
That is quite a serious accusation but, compared with what charities such as StepChange offer all its clients, which is the best independent advice with the client at the centre of the discussion, it is fair to point out that in many cases commercial debt management firms simply do not have the expertise to help resolve people’s debt situations in their best interests even if they want to do so. For instance, out of the hundreds of debt management firms that exist, the Insolvency Service lists only four as able to set up a debt relief order—one of the key tools to help debtors on lower incomes. In contrast, StepChange spends about £2 million a year on DROs for its clients.
The October 2014 report on this sector produced by the newly formed Competition and Markets Authority says:
“We consider that there is … a case for the FCA to conduct a more broadly-based review of the activities of lead generators”,
including,
“the role of fee-charging brokers ... possibly timed to take place during the authorisation process ... that is now getting underway”.
It is estimated that there were about 600,000 DMPs at the start of 2012. Of these, about 350,000 were with commercial fee-chargers. In 2010, the OFT estimated that debt management firms were making some £250 million profit from these plans—from clients who were, by definition, already over-indebted. It must be obvious to all concerned that, if fees are charged by commercial debt management companies to people who are suffering from unmanageable debt problems, the consequence will be that the extra costs taken will divert funds away from the creditor to the fee-charging DMP provider, and that will ensure that the time taken to repay the debt is extended. That cannot be good for consumers. It cannot be good for the creditors, who will wait longer and get less, and it is not good for the economy because it is a drag on GDP and will slow the recovery.
In this Committee we have discussed the role of the FCA and other sectors of the credit market, and have raised similar concerns in other Bills, not least the one that originally set up the FCA. Although I think highly of the FCA and respect the intentions of senior staff I have come across, it is becoming clear that there is a fundamental problem with the way it is established. Although its paperwork states and its staff will assert that the consumer is at the centre of its thinking, in practice the FCA has a different objective, which it takes as a surrogate for consumer welfare but which is not correct. It ensures that, across the financial services sector, markets are functioning well.
This means that we get perverse results. Almost irrespective of the consumer detriment or harm, the FCA appears to be content if a smaller number of well capitalised firms are trading, such that they are making reasonable profits—which I suppose means reasonable in relation to the capital employed. That is why cleaning up the payday loan market will not in fact eliminate payday lenders or other high cost credit operators, and why its tougher, more proactive regulation of the debt management market—while long overdue and very welcome—will not remove the problem of commercial DMP providers. If, for example, the FCA determines that the DMP market is functioning well, the FCA will be happy—even though the existence of fees will make it much harder for clients to repay their debts, and it will take them longer to do so.
A good example of this is the cap the FCA has introduced on charges in the DMP sector. We think fees should be abolished altogether on the ground that all clients’ money should be utilised to repay their debts. However, the cap has been set at a relatively high level: firms can charge a maximum of 50% of a customer’s repayments, although that must decrease once set-up costs have been recovered. Thereafter, however, monthly management charges—as distinct from set-up fees—can be charged at a flat percentage of customer repayments. Most of our clients pay about £200 to £250 per month into their DMP. If 50% of the early payments, and let us say 10% of the rest, go to a commercial operator, you can see how the impact will work out. This is absurd. It means that a client of a profit-seeking debt management company with £20,000 of debts will typically pay hundreds of pounds in set-up fees and thousands of pounds in monthly management fees over the term of the plan—money they cannot afford, which should be being paid to their creditors. Compared with a free debt management plan, this will extend the time it takes to pay down debts by as much as several months, and sometimes more than a year. There is substantial consumer detriment here in this market, and it is hard to believe that such a high level of charges is consistent with promoting good consumer outcomes. Our amendments would ban upfront fees for credit brokerage, and clean up DMPs.
Finally, I will touch on one other issue. As a result of FCA regulation, commercial debt management companies are starting to exit the market, and under the amendment, this would accelerate. There will be some transitional problems; for example, when a fee-charging debt management company closed its doors earlier this year, StepChange Debt Charity was on hand to pick up the pieces—and that was good. It was able to support over 400 people, but it is important to note that in so doing, the charity found that more than half of those people had been sold a debt management plan which was not suitable for their circumstances. As the FCA authorisation process starts to clear out the worst operators in this market, it will be up to charities such as StepChange, working with the regulator, to pick up the pieces and help rebuild people’s lives. That will be a significant amount of work. I have written to the FCA to suggest that a plan needs to be put together with the creditors, StepChange and others in the charitable sector to ensure that clients whose DMPs fold under them can be offered a free DMP or other appropriate debt solution. I hope that the FCA will take up that offer to engage. I beg to move.
Baroness Jolly
My Lords, I thank the noble Lord for raising such an interesting and critical point on this aspect of consumer credit, and I acknowledge the excellent work of StepChange. The Government have fundamentally reformed regulation of the consumer credit market. Consumer credit regulation transferred from the Office of Fair Trading to the Financial Conduct Authority—FCA—on 1 April 2014. The Government have ensured that the Financial Conduct Authority has robust powers to protect consumers. It has a broad enforcement tool-kit to punish breaches of its rules, there is no limit on the fines it can levy and, crucially, it can force firms to provide redress to consumers. The FCA also has flexible rule-making powers to take further action if it is deemed necessary to protect consumers.
Turning to Amendment 105K on the issue of credit brokers, it is clear that there is a real risk in this market of consumer detriment being caused by unscrupulous brokers. FCA rules already require credit brokers to disclose their status and any fees payable before the consumer enters into a brokerage contract. The FCA has made clear that disclosure must also cover the consumer’s right to a refund if no credit agreement is entered into within six months following an introduction. The FCA requires credit brokers to comply with the high-level principle of “treating customers fairly”. However, the Government share the noble Lord’s concern about the continued bad practice in this sector. The Government and the FCA are currently jointly considering what further action is needed to protect consumers, and will provide an update in the coming weeks.
Turning to Amendment 105M on the issue of debt management companies, the Government are concerned about the potential for detriment to occur to vulnerable consumers using debt management plans. Our focus is on comprehensively reforming regulation of this sector, as part of our wider reform of consumer credit regulation. Consumers participating in debt management plans are far better protected under the new FCA regime. The FCA has introduced a range of binding rules designed to protect consumers; it has made it clear that fees should not undermine the customer’s ability to make significant payments to the creditors throughout the duration of the debt management plan.
The FCA is thoroughly assessing every debt management firm’s fitness to trade as part of the authorisation process—a process that is already under way. Firms that do not put their customers’ interests first and comply with the FCA’s threshold conditions will not be authorised. The FCA is also undertaking an in-depth thematic review of the debt management sector. The Government therefore firmly believe that the new FCA regime will deliver—and is already delivering—a cleaned-up debt management market that is able to meet consumers’ needs in supporting them to deal with their debts.
The noble Lord suggested that the FCA review lead generators for debt-management providers. The FCA is undertaking this in-depth review of the sector, including looking at how use of these lead generators may be affecting consumers, so that is all part of the mix. I would be very grateful if the noble Lord would consider withdrawing the amendment.
Lord Stevenson of Balmacara
I thank the Minister for her very considerate response. It is a very complicated area, one that is in much flux, but I do not think that that should just be taken as a given, because the pressures, the pain and the anxiety that all this causes to vulnerable consumers—and also to ordinary people who are not necessarily too vulnerable in the conventional sense—are very substantial. We must always think of them as well as of the broader points that have been made in response to the amendments.
My central point, which, with respect, I think the Minister did not mention, is our increasing concern about the difference between saying that consumers’ interests are at the heart of the operation—which I absolutely accept is like a piece of rock built right through the FCA; you cannot have a conversation without it saying how much it puts consumers at the centre of it—and the reality that the measures that it uses in its day-to-day work are about market efficiency and fairness. I am not saying that that is wrong: I am just saying that I am not entirely sure that this is a one-to-one fit. Establishing a market involving payday lenders that is efficient and fair, may not remove the detriment that the remaining payers will be caused. I do not think that there is an easy answer to that; it is just something that we all should bear in mind when we think about how we regulate these matters.
Lord Stevenson of Balmacara
My Lords, we should all pay tribute to the amazingly long and trenchant campaign that has been waged by the noble Baroness. I have sat through most of her attempts during the past three or four years to get movement on this. Her arguments grow with every year and add new dimensions. Often, as she has done today, she offers a lifeline to the Government if they want to take it. It is always sad that they do not seem to be able to see the points that she is making or act on them. It occurred to me when she was speaking that it is a big pity that the Bill is arranged as it is. She ought really to appear at Halloween as an eerie ghost rattling her chains and saying, “Remember the financial transactions blocking”. Ministers would all shake and shiver in their shoes and be unable to respond without fear and trembling. I realise that that might apply to us if we are so lucky as to win the next election; she may come back to harass my noble friend or even me if we are in a similar position, so perhaps I shall wipe that away.
This is serious stuff. I recall being given the hope by the Minister in charge of the gambling Bill, when we were pursuing similar lines, that such a measure would be the right approach. The noble Baroness is absolutely right to bring it back at this stage; that is entirely in line with what was said then and the advice that was given.
The gambling Bill was a small, modest measure which was not expected to take up much time in the House or to carry much weight. It was deliberately sold to us as a measure that would be of great advantage to all concerned if it could slip through quickly because it was dealing with the particular issue of bringing back onshore the gambling bodies that had moved offshore. They were offering offshore opportunities for people to gamble; if they were onshore, they would be subject to the regulatory process.
Of course, we were happy to support that, but we were also able to make it a bit better by adding a few things during the process. It was clear in that process that the Bill was largely doing an awful thing that occasionally occurs in government: willing the ends of policy but not the means. The end of the policy is that we do not want people who are not regulated and not operating according to the rules within this country still to reach out to gamblers in United Kingdom. To achieve that, obviously there must be some mechanism by which we can pursue them. That is either by blocking their internet activities—these people operate in small foreign territories without fear of being pursued, so that is completely fanciful—or by ensuring that the financial arrangements, which are the lifeblood of their operation, can be blocked.
It is a matter of some irony that only yesterday we were discussing—in this very Room but on a different Bill—those who have had their intellectual property traduced by other companies in the internet world, otherwise known as copyright theft. We were investigating the best way of ensuring that those who owned intellectual property and had it stolen could seek remedies through the courts to make sure that the abuse was stopped and damages paid. It turned out that there were two pieces of statute that were possible to use. One was brought in long before the internet was as widely used as it is now—the Copyright, Design and Patents Act 1988 —and the other was the not yet fully implemented Digital Economy Act 2011, of great memory. This had specific clauses for regulations to be brought forward to allow the courts to block internet sites that were abusing copyright.
I would argue, on the basis of that experience, that this is something that is coming. Here we have a situation where, we are told, more than 40 blocks of this type were made last year. The Minister who responded to the debate was very proud of the fact that the Government had a mechanism in place to deal with internet abuse of the type specified in relation to copyright. This could be read across to those engaged in illegal or unregulated activity relating to gambling in the UK. Why is it not possible to use the experience that has been gained through this process to answer the questions of the noble Baroness, Lady Howe, about how to make sure that we are able to provide the means of delivery for the desirable policy aims included within the gambling Bill?
Baroness Jolly
I thank the noble Baroness for the amendment. We have met before on this issue, and her involvement and advice on this matter has helped us to make progress, which I am going on to explain. This amendment relates to the enforcement of the Gambling (Licensing and Advertising) Act 2014, which also has consumer protection as its primary focus. The issue of enforcement was extensively debated during the passage of the Act. I wholeheartedly agree that effective enforcement is essential to deliver the consumer protection aims of the 2014 Act.
Earlier this year I announced in the House that the Gambling Commission had reached agreement with major payment systems organisations—MasterCard, Visa and PayPal—to work together to block financial transactions with unlicensed operators. It is worth teasing some of this out for noble Lords, because MasterCard, Visa and PayPal cover the vast majority of relevant financial transactions. The noble Baroness mentioned the others but, although they might not appear in the list, the other payment service providers also use Visa and MasterCard. The branding might not be there but, behind the system, the actual infrastructure will be Visa or MasterCard. Reputable and legally compliant payment service providers are unlikely to have any greater interest in facilitating unlawful activity than the major providers have.
The noble Baroness raised a point about organisations being legally obligated in common law not to process transactions of any illegal provider. The terms and conditions of Visa, MasterCard and PayPal require that all transactions must be legal in all applicable jurisdictions. I hope that that has clarified that issue.
Since then, the Act has come into force, but only a few days ago on 1 November. I am able to confirm that the arrangements for disrupting illegal financial transactions are now in place. We believe that these arrangements offer the best solution and will disrupt revenue to unlicensed operators selling into the British market. They enable the Gambling Commission to take swift action against illegal operators; outside of a rigid legislative framework, these arrangements can adapt to tackle the very latest developments as technology changes.
The Government believe that working in partnership with those organisations towards a common goal of tackling illegal activity is the most appropriate way to proceed. No payment system organisation wants or can afford to be associated with illegal activity. I am sorry if the noble Baroness does not remember that from the previous Bill but it was certainly something that I was aware of; I am almost certain it was mentioned in Committee or in the Chamber on Report. However, we are not complacent on this issue and it is right that it is kept under scrutiny. The Gambling Commission will provide in its annual report to Parliament, which will be tabled each July, an assessment of the effectiveness of these arrangements in enforcing the 2014 Act. That will enable the Government to ensure that the Gambling Commission continues to have all the enforcement tools that it needs.
I thank the noble Baroness for her extensive input on this important issue, but, given the action taken and my reassurances, I ask her to withdraw her amendment.
Consumer Rights Bill
Debate between Lord Stevenson of Balmacara and Baroness Jolly
Lord Stevenson of Balmacara
My Lords, I hope the noble Baroness is not falling into a mode of argument which suggests that since you cannot stop children watching programmes all the time, it is not worth the candle to try to prevent these things happening.
Baroness Jolly
Nobody wants young children to grow up thinking that payday loans are the right way to go but we believe that currently there is a tough package of measures in place to ensure that vulnerable consumers are protected from inappropriate practices. I hope that the noble Lord will see fit to withdraw the amendment.
Consumer Rights Bill
Debate between Lord Stevenson of Balmacara and Baroness Jolly(9 years, 6 months ago)
Grand CommitteeRead Full debate Read Hansard Text
Baroness Jolly
I will drop my noble friend a line. I am sorry, that has thrown me. I was given this and told exactly where to slot it in.
Lord Stevenson of Balmacara
Just to pick that up and endorse it, in my researches for today I just happened to check back in Hansard and I felt it was important to reflect on this point. When this was discussed previously, the noble Viscount, Lord Younger of Leckie, said that the noble Lord, Lord Clement-Jones, had sent him a paper,
“on how the issue of unfair contracts could be addressed. I confirm at the beginning that I have received this paper and that we will consider his suggestions very carefully. It is a little early to talk about this as a formal review, but I reassure him that we will certainly discuss this and take it forward”.—[Official Report, 11/3/2013; col. 55.]
I am very heartened to hear from the noble Baroness that there has been a meeting. That is a good thing. If evidence was required from the creative industries, I am sure that it would have been supplied, so what is the hold-up?
Baroness Jolly
We can clarify this. The noble Viscount, Lord Younger, had a meeting to discuss this and we have asked for more detail. I hope to be able to come back with more detail on this for noble Lords, certainly before Report.
Moving to Amendment 63A, I would like to add my compliments to those of the noble Lord, Lord Stevenson, to my noble friend for speaking to this well-crafted amendment so clearly and for raising the important issue of copycat packaging. This was debated at the Committee stage of the Intellectual Property Bill in June last year and the noble Viscount, Lord Younger of Leckie, said that the Government would undertake a review into this issue.
Consumer Rights Bill
Debate between Lord Stevenson of Balmacara and Baroness Jolly
Baroness Jolly (LD)
My Lords, for the first time, this Bill clarifies what rights consumers have when they buy digital content. Those rights include that the digital content be of satisfactory quality. If, before making a decision to buy, a consumer relies on a claim as to the outcome of digital content, it is, in many cases, absolutely right that this claim should be taken into account when assessing whether the digital content is of satisfactory quality. It may not, however, be appropriate when the claim relates to factors such as the subjective enjoyment of the content, such as an action game trader saying that the game will give the consumer “the greatest thrill of your life”. Thank you to the Bill team for that one.
That is why, as with goods, one of the factors taken into account in an assessment of satisfactory quality is “other relevant circumstances”. Again, I would like to stress that Clause 34(5) provides that this includes,
“any public statement about the specific characteristics of the digital content”.
This could include key outcomes. Where a consumer has relied on a claim made by a trader as to the outcome of the digital content, in many cases they will therefore already be able to take this into account when judging whether or not the digital content is of satisfactory quality.
When we discussed the question of outcomes relating to goods, the noble Baroness, Lady Hayter, distinguished claims about the physical characteristics of goods from claims about the outcome that the goods were supposed to achieve. Noble Lords may remember that there was much talk about the efficacy of washing machines and washing powders. However, statements about digital content may form part of the description—if the statement says that a calendar will include details of all public holidays, for example. Consumers have clear remedies if digital content, like goods, is not as described.
Where consumers are deliberately misled—again, as we have discussed in relation to goods—consumers are also protected under the Consumer Protection from Unfair Trading Regulations. The Government have given consumers a private right to redress if these regulations are breached, and we have clarified that they will apply to sales of digital content. These changes came into effect on 1 October. Under the Bill and the regulations, therefore, it is clear that there is strong consumer protection in place in relation to claims made by traders as to the outcome that digital content will achieve.
Earlier in Committee, the noble Baroness, Lady Hayter, expressed the view that if statements about outcome are already covered by the legislation, this should be included in the Bill to provide clarity to consumers. There may be a number of unintended consequences if that happened here. First, although it will in many cases be appropriate that public statements about the outcome of digital content should be taken into account when judging satisfactory quality, as with goods, a requirement that all statements be taken into account is not a practical option. Such a specific requirement would lose the necessary flexibility that we have under the current provisions. It would draw in statements made in advertising that are not intended to be taken literally. For example, an advertisement might state that a brain training app will turn you into the next Einstein, but a particular concern of the digital content industry, much of which is based on creative content, is that it would draw in statements as to the subjective enjoyment that the consumer would get from the digital content or the artistic merit of that content, which fall outside the meaning of “quality” that is understood in the Bill.
Secondly, there is a risk around narrowing the interpretation of “relevant circumstances”. The more circumstances that are specified as included, the greater the risk that the concept will be narrowly construed. As such, the Government consider that the Bill already provides the appropriate balance and flexibility in determining whether digital content is satisfactory. However, we can address the noble Lord’s point about providing clarity to consumers that statements about the outcome of digital content and goods are relevant factors in an assessment of “satisfactory quality”. This point will be set out in the guidance we will provide when implementing the Bill.
On Amendment 35, I do not dispute that it is important that consumers are protected if digital content is not fit for an advertised purpose. As we have discussed, the Bill provides this protection in Clause 34. The standard of satisfactory quality can include digital content being fit for its usual purpose and takes into account public statements made not only by the trader, but also by the producer or any representative of the trader or the producer. Clause 35 addresses a slightly different situation. Whereas Clause 34 refers to the purposes for which digital content of that kind is usually supplied, the purpose of Clause 35 is to ensure that consumers are protected when they rely on the trader’s judgment. If consumers make known to a trader that they intend to use the digital content for a particular purpose, and if it is sold to them on that basis, the clause clarifies that the digital content should indeed be fit for that particular purpose.
Let us take an example. A consumer may want to purchase an app that tells them whether or not their device is level, for the purpose of building a home extension. The consumer emails a trader to ask if the app can be used as a spirit level for building the extension and receives a reply stating that it would be suitable. So the trader has been made aware of the customer’s intentions for the app and has sold it on that basis. The consumer should be able to rely on the fact that the spirit level app will be accurate enough for their needs in constructing the house extension. Clause 35 protects the consumer even if the intended use is not the usual purpose for the digital content. Public claims about the digital content may not be relevant here. This clause is all about situations where the consumer is seeking the advice of the trader for less usual purposes, which may not be public. Indeed, this amendment may cut across the consumer protection that Clause 35 provides. Clause 34 already covers claims as to the quality or usual purpose of the digital content. I hope, therefore, that the noble Lord will be prepared to withdraw the amendment.
Lord Stevenson of Balmacara
I thank the noble Baroness for her comments, although I am slightly alarmed by the example of the spirit level app. However, that may have more to do with my technological ineffectiveness in terms of dealing with the tools of the trade; we can talk about that later. The key to some of these issues is better guidance because it is clear that we are in new territory here. What works for tangible goods may not be as effective in terms of intangible goods, and I think that that is common ground between us. Obviously we cannot see the guidance now, but I would ask the noble Baroness to advise me, not necessarily from the Dispatch Box, whether it will be available for consultation before it is issued and whether there will be the usual round of discussions with trade bodies, producers, consumer bodies and others. That would be helpful in terms of getting us to the right place. With that, I beg leave to withdraw the amendment.
Lord Stevenson of Balmacara
My Lords, that is an interesting point. I think that the intention behind the amendment was to restrict the applicability to purchases and the information available at the time that purchase was made. However, it is a fair point to suggest that where a purchaser clearly has intentions to upgrade or change the product in some way, there is a case for that being signalled at the time that the purchase is originally made—that other options or, indeed, if it were mandatory, extra charges could be coming down the line. Perhaps the Minister could respond to that point.
Baroness Jolly
My Lords, this amendment relates to communication of the costs that the consumer will face. This can be particularly important for digital content provided under the “freemium” model, discussed earlier in Committee, where the original digital content may be provided for free, but consumers have the opportunity to purchase extensions and improvements to this content through “in-app purchasing”. That is why the Government are committed to providing clarity and transparency to consumers when it comes to costs.
I am sure that noble Lords will be happy to know that the Consumer Contracts Regulations, which came into force in June of this year, ensure that the trader provides information to the consumer about the total price, including taxes, before the sale is made. Under the regulations, this will have to be clear and comprehensible to the consumer before they buy. The Bill makes it clear that this information becomes part of the contract and cannot be changed without the consumer’s express consent. Furthermore, the regulations make it clear that the consumer’s express consent must be given before any payments are made in addition to the main price.
We have also made it clear that pre-ticked boxes, where the trader has already ticked the “agree” box for the consumer, are not enough to signify express consent for those additional payments. This should go a considerable way towards ensuring that a consumer knows exactly what they are buying before they commit to it. Under the “Unfair Terms” part of the Bill, which is still to come, additional charges will not be able to be hidden in the small print.
Legislation to provide clarity on pricing and a clear obligation to pay is already in place. However, we are all aware of cases where young children in particular have racked up high bills relating to in-app purchases in games. This is an issue for enforcement. That is why the then Office of Fair Trading conducted an investigation into children’s online games at the end of last year, which resulted in the publication of a set of principles for games manufacturers in January, based on the Consumer Contracts Regulations and the Consumer Protection from Unfair Trading Regulations.
The noble Lord, Lord Stevenson, asked me to clarify whether the Office of Fair Trading principles applied to the online games industry. The amendment would provide a statutory basis. So the OFT principles are based on statute. They are based on the Consumer Contracts Regulations and the Consumer Protection from Unfair Trading Regulations. I am therefore confident that the OFT—now, of course, rebadged as the CMA—already has the legal toolkit that it needs. To reiterate this, the CMA, as it is now known, is currently looking into industry’s compliance with these principles and will consider enforcement action in necessary cases.
Lord Stevenson of Balmacara
I thank the noble Baroness for giving way. I am interested in what she said about the principles being set out in an OFT report but I am not clear where we ended up. Perhaps she would reflect on that a little more so that I have a better understanding of it. The principles bite quite hard on this problem, so if they were to be given statutory backing, that would go a long way towards answering the other points that are made in my amendment. Can she confirm whether that is the case? Is she saying that the impact of the Bill as it currently stands is such that it would incorporate the set of principles identified by the OFT or is she not? It is a simple question.
Baroness Jolly
That is my understanding, but I sought to check the point with my team before it goes into Hansard. They already have statutory backing in the regulations. We are already there.
Lord Stevenson of Balmacara
Just to be troublesome, the Advertising Standards Authority is not a statutory body, although it does still exist where the OFT does not. As we have heard, it is now part of the CMA. Is it also the case that the ASA’s principles, which again bite hard on this problem, would be considered to be part of the statutory provision or not? I am happy to wait for a reply because I appreciate that it might take more time.
Baroness Jolly
Rather than mislead the noble Lord, I shall send him a letter and copy it to all noble Lords who are concerned with this debate.
I shall proceed with my response. We are pleased that the games trade associations have responded positively to these principles since the industry does have a duty to behave responsibility. Of course, parents too have a responsibility, for example, to turn off in-app purchases. I confess that I did not know they exist, but my kids are a bit big for them now. I hope that, as a result of this action, we will continue to see progress on compliance with the regulations in this area, and I would therefore ask the noble Lord to withdraw his amendment.
Lord Stevenson of Balmacara
My Lords, I am grateful to the Minister for responding to these points and I look forward to receiving a letter. On reflection, if the letter could cover both the OFT, now CMA, principles and the ASA principles, that would be a lot better.
We share a concern on the generality of these issues. These games are incredibly popular and are played by loads of people, but the particularity of the problem which we have identified is that the danger arises because it is mostly children who are engaged with them. Yes, it is possible to switch off the in-app acquisitions elements that are part of the process of playing games these days, but I still think that there are many concerns which will surface in other areas alongside those, such as exposure to advertising and so on. They form part of the value chain of the very products we are talking about. Although we are dealing with a first level of concern here, I worry that we will need to come back to this, perhaps in some other forum, and question how it is that the almost addictive quality of the game-playing capacity that now engages among young people in this and many other countries is being accompanied by a new mode of trading which is not just purchase based but, as we have heard, is about acquiring personal details on purchasing habits that help to inform trading activities, particularly as they affect children. However, these issues are broader that what we have before us and no doubt we will come back to them at some point. In the mean time, I beg leave to withdraw the amendment.
Baroness Jolly
My Lords, when the issue of the trader’s responsibility when they are aware that they have a digital content product that is faulty was discussed in the other place, much reference was made to inaccurate mapping software that continued to be offered to consumers even after it was known to be faulty. Examples like this are embarrassing to the businesses in question. No reputable manufacturer wants to release an inadequate product, especially in these days of Twitter, Facebook and other social media, where news of such faults spreads really quickly. When problems such as this do occur, it is in their best interests to act quickly to resolve them. Consumers vote with their feet. In the case of the inaccurate mapping software, consumers simply switched back to a competitor’s product.
It is therefore in the interests of traders and manufacturers who find themselves with a faulty product to act quickly to produce an update to rectify the fault, and to ensure that consumers receive that update. Of course, in the case of updates to apps, downloaded products or products that are uploaded and then registered online, manufacturers already proactively inform consumers when updates are available.
However, the amendment has implications that would be burdensome on business and, at the least, an unwelcome irritation to consumers. The effect of the amendment would be to require traders to make consumers aware that there is a bug before they provide an update. This would seem to introduce an unnecessary step in the process, particularly for those consumers who have not already noticed the bug. It could also be burdensome for businesses, especially small businesses, if the result is an increase in complaints that have to be handled, diverting resources away from the important issue of producing the update.
Of course, I am not discouraging consumers from complaining to traders where their rights have been breached—quite the opposite. The Bill aims to empower consumers to assert their rights. However, encouraging consumers to claim a remedy where they might otherwise not have noticed that there was a fault, and a repair was already being produced by the trader, seems unnecessary. I therefore ask the noble Lord to withdraw the amendment.
Lord Stevenson of Balmacara
I thank the Minister for her response. I will read carefully what she has said and consider it. I did not agree with her view that this might in some senses be unwelcome to consumers. I think we are underestimating the worries that many people have when they buy material that is then subject to problems, and they need to be updated about that. Nevertheless, for the moment, I beg leave to withdraw the amendment.
Consumer Rights Bill
Debate between Lord Stevenson of Balmacara and Baroness Jolly(9 years, 6 months ago)
Grand CommitteeRead Full debate Read Hansard Text
Baroness Jolly
The noble Lord has eloquently described how unfair it would be for a consumer to have to pay the cost of returning substandard goods. I have a lot of sympathy for the sentiments that he conveys; to receive substandard goods is disappointing and frustrating in itself, but to have to pay the cost of returning them really would heap insult upon injury. Where I think we differ is that I am not convinced that further protection is required. This is because of the protections already in the Bill and in common law. Moreover, there seems to be little evidence of bad practice from traders insisting that consumers fund the return of shoddy goods. Some large online retailers already cover the cost of returning goods, either by arranging for a courier or by providing a freepost sticky label.
The Bill already provides protection by stating in Clause 27 that there is no need for the consumer to return the goods unless they have specifically agreed to do so. The consumer need only make the goods available to the trader—for example, to facilitate their collection. Furthermore, if the consumer rejects the goods and terminates the contract, he or she can also pursue a damages claim against the trader in order to recover further costs that they have incurred, and these damages could include the cost of returning the goods to the trader if they had been required so to do. So although I am with the noble Lord opposite on the spirit and intention behind the amendment, I question the need for it. I therefore ask him to withdraw the amendment.
Lord Stevenson of Balmacara
My Lords, that was not unexpected, although I noticed, as the Minister was framed by the TV behind her, that Christmas bells were ringing, and I thought my time had come and this was going to be the first crack in the edifice that has been erected between us in this debate, but sadly not.
We are so close on this that I do not understand why the Minister cannot accept the argument. I find it very strange that the Government would be happy to rest on a situation where a poor, vulnerable consumer, with a sofa that is bulky, difficult and unfit for purpose, has to rely on the good will of the trader to send a courier van, as she has described it, or even to send a sticky label—though I do not think that that would be much use—in order to send the sofa back to the warehouse. What happens if the trader does not do that? Are we really saying that everyone in the country has to become expert in raising small claims charges in small claims courts to try to persuade recalcitrant traders to do what is obviously the expected thing? I do not think so. I hear what the Minister says and I understand where she is coming from, but we might wish to return to this. I beg leave to withdraw the amendment.
Consumer Rights Bill
Debate between Lord Stevenson of Balmacara and Baroness Jolly
Baroness Jolly (LD)
My Lords, I turn first to Amendment 10. The Government agree that it is important that when a consumer buys goods they should have confidence that they have free use of them without worrying that someone else has a claim to them. The consumer should always be made aware if someone else has a claim to the goods so that it does not come as a nasty surprise later. While I appreciate that the intention of the amendment is to ensure that this happens, Clause 17(2) already addresses this point appropriately and proportionately.
Clause 17(2) requires the trader to disclose any outstanding claims or charges over the goods. The provision makes it a term of the contract that there are no charges that the consumer was not told about or does not know of. If such charges are not disclosed to the consumer, the trader will have breached the contract and the consumer may claim for damages.
In simple terms, the trader makes a contractual promise that there are no charges or claims over the goods other than those disclosed. If the consumer is unaware that goods are subject to any charge, and the trader has not told them of any charge, they can expect the goods to be free of any charge. They will have protection if this is not so. That protection already exists under the current law and Clause 17(2) retains it. By making this a term of the contract, subsection (2) also provides a means of access to compensation for the consumer.
Clause 17(2) potentially goes further than the amendment in that it requires the trader to disclose all outstanding claims or charges. The amendment would require disclosure only when the claim or charge might impact on the consumer’s enjoyment or use of the goods or cause them financial detriment. I worry that this could be a potential source of dispute between the consumer and the trader. It is not clear how the consumer could demonstrate that a particular claim should have been expected to impact on their enjoyment or finances. The approach that is already in the Bill in Clause 17(2) is simpler; it is sensible; and it provides stronger protection to the consumer.
I want to respond more specifically on logbook loans, as addressed in Amendments 3, 5 and 56. One market where there are examples of consumers buying goods that have other claims to them is that of logbook loans. Across the Government, we share the Opposition’s concerns about the risks to consumers from such loans. The Government believe that people should be able to borrow and have the tools to make an informed decision about which credit products are right for them, but consumers should be confident that they will be treated fairly when things go wrong.
As the noble Lords will be aware, responsibility for consumer credit regulation, including logbook lenders, transferred from the Office of Fair Trading to the Financial Conduct Authority on 1 April. Consumers are far better protected under the stronger, well resourced FCA regime. The FCA defines logbook loans as “higher-risk activities” and, as a result, lenders face closer supervision. Moreover, logbook lenders are in the first phase of firms to require full authorisation, with the FCA thoroughly scrutinising firms’ business models and compliance with its rules.
It is important that consumers are aware of their rights before taking out logbook loans. The FCA therefore requires logbook lenders to provide a pre-contractual explanation to borrowers of their rights before any agreement is signed. On the noble Lord’s point about logbook lenders and affordability tests, logbook lenders are required to meet the standards that the FCA expects of lenders, including making affordability checks. These rules are binding, and the FCA can take action where wrongdoing is found.
Logbook lenders are subject also to the FCA’s high-level principles, including the overarching requirement to “treat customers fairly”. The Government have ensured that the FCA has a wide enforcement toolkit to take action where its rules are breached. There is no limit on the fines that it can levy and, crucially, it can force firms to provide redress to consumers.
The FCA actively monitors the market. It has flexible rule-making powers and, if it finds further problems, it will not hesitate to take action. Indeed, the FCA has said that it is,
“putting logbook lenders on notice”,
and that its new rules give it,
“the power to tackle any firm found not putting customers’ interests first”.
In addition to this robust action from the FCA, I confirm that the Law Commission has agreed to a request from Treasury Ministers to look at how best to reform the Bills of Sale Act. This legislation underpinning logbook loans is old, lengthy and incredibly complex, and affects businesses as well as consumers. Evidence suggests that around 20% of bills of sale are used by small businesses rather than individual consumers. As a result, the Government believe that the Law Commission is best placed to undertake a thorough assessment of how to bring this complex, arcane and wide-ranging Victorian legislation up to date. This project is now under way and the Law Commission launched its call for evidence last week.
The Government believe that this package of action will fundamentally strengthen protections for consumers using logbook loans. I therefore ask the noble Lord to withdraw his amendment.
Lord Stevenson of Balmacara
I thank the Minister for her comments. On the first point, about the third party, I take her point that Clause 17(2) covers the issue; I understand that. I would like to read what the Minister said in Hansard before I make up my mind on this, but my worry is that it still leaves the situation that anyone who wishes to take advantage of Clause 17(2) has to raise an action in order to recover the costs and damages that they may have lost. We would rather have the thing eliminated altogether so that it just cannot take place. That is the difference between us on this. We have cross-read Clause 17(2) carefully but still feel that it was right to try, within this overall package, to focus on the bill-of-sale techniques and legislation that have been used. That was the basis of our understanding, but I note what the Minister said on that point.
I am glad that the Government share our concerns about logbook loans. They are a really unpleasant way of offering high-cost credit. I am conscious that the responsibility now lies with the FCA on this. However, I make the following points. Simply passing responsibility to that body is not necessarily the same as cleaning up this area. There will be a time lag before the FCA gets around to this and it is quite interesting that the changes that have been made in the area of payday lending have been brought to the front of the FCA’s enormous workload—it has a lot to do to get itself up to speed in so many areas across our financial services sector—really only because of the insistence of this House and, therefore, of the Government. There had to be a decision, for instance, on capping payday loans by January 2015 and that has of course produced action on a magnificent scale. It is not quite there yet, but it is moving in the right direction. While I understand the point, therefore, I still do not think that it would be sufficient to get this issue addressed very quickly.
The problem, on which I think we agree, is about the use of these archaic bills of sale. While I accept that the Law Commission has a good record in this area and it might well be appropriate, there is a time problem with this. The Law Commission is not noted for rushing into action on these matters and, although I in no sense wish to impugn its great work, we are probably talking about three or four years before we get an outcome on that. Are the Government really saying that they are prepared to sit back and allow this to be dealt with by an FCA that, although it has a concern for consumers, as the noble Baroness said, also has a responsibility, which it insists on parading every time you talk to it, to ensure that markets are working efficiently? These two things do not necessarily sit well together. Here is a case with clear consumer impairment. It will not be to the benefit of many consumers to know that the market is working well.
Nevertheless, I accept the Minister’s point on that. I understand that we are basically moving in the same direction. The commitment to ask the Law Commission should result in changes, and it is clear from the evidence that I have already produced that we will be looking forward to legislation coming through. I am worried about the timetable, so we will reflect on this. In the mean time, I beg leave to withdraw the amendment.
Baroness Jolly
My Lords, I am very grateful to Professor Hugh Beale, an eminent legal academic, for his view that the Bill required greater clarity on our intention that there should be no right to terminate a contract for the supply of digital content when the quality rights are breached. It is important to put this beyond doubt to provide the necessary clarity for consumers and business.
The amendments, which are government amendments so they are an improvement that we have made to the Bill, seek to make that explicit by adding a new line into Clause 42 making it clear that there is no right to terminate the contract for digital content when the quality rights are breached. The related amendments in Clause 19 for goods and Clause 54 for services ensure consistent terminology across the goods, digital content and services chapters.
The amendments are technical changes but I realise that the underlying issue has not been fully debated. We will be returning to the substantive point about whether there should be a short-term right to reject digital content when we debate the amendments to Clause 33. If there are no questions at this point, I beg to move.
Lord Stevenson of Balmacara
I thank the Minister for introducing these very technical amendments. We have no objection to them as they are drafted, we want to get that on record, but she has made it clear that Amendment 14, and to some extent Amendment 17, bearing on matters relating to digital content in Chapter 3 of the Bill, contain within them substantive issues that we will want to readdress. I was grateful to note her comment that the fact that we will not oppose these amendments as they go forward at this stage does not rule out the possibility of coming back to the substantive point at a later stage.
Gambling (Licensing and Advertising) Bill
Debate between Lord Stevenson of Balmacara and Baroness Jolly
Lord Stevenson of Balmacara
My Lords, I thank the noble Lord, Lord Browne, for introducing the amendment. We are also signed up to it. The noble Lord spoke at length about the issues that he wanted to raise, building on the meeting that he kindly organised, at which I was also present. I endorse what has been said by other noble Lords who were there, including the noble Lord, Lord Phillips.
The interesting thing about gambling, to me, coming to it relatively unskilled in this area, is that it is one of those areas about which we make a set of assumptions when we approach it, then we discover as we get closer to it that they do not stand up. For example, one thinks of addiction very much in terms of what substance people are taking that has a chemical effect on their body which makes them addicted. But with gambling, all the signs, evidence and research suggest that we are dealing with addictive activity, but there is no physical substance. Of course, it may well be, as the right reverend Prelate was saying, that something about the internet has a way of interacting with our neurons and has an effect that we do not yet fully understand. There is absolutely no doubt, from the reading that I have done for these debates, and from the evidence that we heard at that powerful meeting, that we are talking about something really rather serious and deep-seated worries should flow from that. It is not that the problem is extremely widespread—it is not—but the numbers are still significant. If we are talking about 450,000 people in our society, of course, we as a responsible society should take action to try to help them.
The situation, as I understand it, is that the regulatory position is very clear. There has to be a process for self-exclusion, because it is recognised that it is a helpful way to do it. It may not be the only way to get people away from gambling and it may not be sufficient on its own, but at least—as long as the evidence is there that it is helpful—we must make sure that the regulatory framework supports it. It is obviously right that, for those who obtain a licence to operate in current systems, and in future systems envisaged by this Bill, we need to see the self-exclusion procedures in place. I do not think any of us would be against that, but I have a problem in understanding why it is sufficient for the Government to argue that simply having a voluntary scheme operated by those who perpetrate the harm is sufficient in this case. The evidence that we have—and the very moving testimony that we have heard from the noble Lord, Lord Browne—suggests that those affected by this, those who are addicted and those who are trying to help, say that simply having the mechanism available on a case-by-case basis, on every website that they go to, as it may be regulated in future, and therefore having available the ability to self-exclude, is not sufficient.
If it is not sufficient, what system can we put in place to make sure that it works? Again, the evidence shows that the detailed proposal of the noble Lord, Lord Browne, seems to work for those with whom we have been in touch. Therefore, it seems to me a bit perverse for the Government to continue to say that they do not think that any further action is required in this regard. But what are they saying? I hope that when the noble Baroness responds, she will try to tease out the wording in the letter that we received yesterday from the Minister, which states:
“But this issue is not standing still: the Gambling Commission has indicated that it will be reviewing the self-exclusion provisions as part of a wider exercise to strengthen player protection, with the aim of significant progress within six months towards the establishment of a national remote gambling exclusion scheme”.
That text is not in capitals; I capitalised it as I said it.
That seems to suggest that there is at least the option of having something that will meet the criterion emerging from this evening’s debate—namely, that there must be something that will work for those people who are addicted. It must be something that does not mean they are constantly coming across additional websites which are not part of the scheme. It should, if possible, work with areas that are not yet regulated, although I understand that will be difficult. Certainly, if it were possible to keep open the proposal of the noble Lord, Lord Browne, until such time as the review is completed, that would help us a lot in dealing with the issue behind this amendment.
We are not saying that that is the only way in which this issue can be tackled. However, given what we have heard today and at meetings, I am certainly persuaded that this is something which works. Therefore, if it does the trick, we should keep it in play until such time as all the evidence is available.
It is becoming a theme of our discussions today that we are offering the Minister the chance to get this right at the next pass. My noble friend Lady Jones was a bit nervous about the issue of the watershed and I have my concerns about this big and important matter. As a responsible society, we should take action in this regard. The noble Baroness will say, when she responds, that there is a review and will ask why we should anticipate it. I understand that, but I hope she will recognise that we will want to come back to this issue if satisfactory progress is not made. I support the amendment of the noble Lord, Lord Browne, and the very powerful speeches made tonight on this matter. I hope to hear some good news from the noble Baroness when she responds.
Baroness Jolly
I start by thanking the noble Lord, Lord Browne of Belmont, for his amendment, which seeks to create a centralised self-exclusion scheme. I seek to reassure him with regard to the Secretary of State’s letter and with regard to the noble Lord’s suggestion that gambling is being liberalised. The Government do not see this as a liberalising Bill. It ensures that all operators who currently advertise in Britain, and wish to do so in the future, are required to have a Gambling Commission licence. This is consistent with what the Secretary of State was saying.
Problem gambling is debilitating and I reassure noble Lords that the Government take this extremely seriously. I am in absolutely no doubt about the commitment of the noble Lord, Lord Browne, to this. Problem gambling is not only debilitating for the gambler himself or herself, but creates a heavy burden on their families and on society at large. I was not at the relevant presentation but I have heard that it was very powerful. Strategies to prevent and address problem gambling are key aspects of the social responsibility obligations set out in the Gambling Commission’s licence conditions and a priority within the Government’s approach to gambling more generally. Self-exclusion is a very important tool to assist those who are experiencing problem gambling or wish to exclude themselves to prevent it.
Under the Gambling Commission’s existing licence conditions, all licensed operators are required to have effective procedures in place to allow consumers to self-exclude. Therefore, once the Bill is enacted, all remote gambling operators licensed by the Gambling Commission will be required to offer self-exclusion to their customers. This marks a real step forward in increasing player protection for British consumers and will mean that future improvements in this area by the Gambling Commission will apply to all operators selling into the British market.